Australian Dollar weakens against Japanese Yen following weak Australian employment data

• Australian Dollar depreciates as Employment Change drops by 39,300 jobs, missing market expectations.
• BoJ’s Junko Koeda highlights upside inflation risks while markets weigh potential Japanese currency intervention.
• Japanese central bank expected to pause rate hikes in October to assess prior policy impacts.

AUD/JPY extends its losses for the second consecutive day, trading around 109.60 during Asian hours on Thursday. The currency cross loses ground as the Australian Dollar (AUD) declines following the release of weaker-than-expected domestic labor data.

The Australian Bureau of Statistics (ABS) reported that Unemployment Rate remained at 4.7% in September, missing the market consensus of 4.6%. Employment Change contracted sharply, dropping by 39,300 jobs compared to a 39,500 gain in August and well below expectations for a 20,000 increase. The Participation Rate also eased to 66.8% from a revised 67.0% in August.

Behind the headlines, Full-Time Employment rose by 34,400 (reversing an earlier 6,300 decline), but part-time positions plummeted by 73,700 (following a 45.8K rise previously). Sean Crick, ABS head of labor statistics, noted that a higher proportion of people remained unemployed in September compared to recent years, while part-time hours worked dropped 1.5% alongside a 0.4% increase in full-time hours.

The Japanese Yen found additional support against its major peers from ongoing market speculation that Japanese authorities might intervene to prop up the domestic currency. However, reports suggest BoJ officials are inclined to hold off on a back-to-back rate hike at their October meeting, preferring to evaluate the cumulative impact of past interest rate increases alongside lackluster consumption and subdued services inflation.

BoJ’s Koeda flags upside price risks and backs further rate normalization

Koeda’s speech score of 8.2/10 on FXS Speechtracker matches the historic average, signaling a consistently hawkish stance rather than a new inflection point. The emphasis on upside price risks from YEN depreciation, robust global AI demand, and the Middle East situation, alongside comments that neutral rates are well above 1 percent and that financial conditions remain accommodative, reinforces a bias toward further rate hikes and balance-sheet normalization.

Koeda’s view that recent rate hikes are not expected to curb consumption, that companies’ financing conditions remain favorable, and that underlying inflation is anchored around 2% with steady wage gains supports a narrative of sustained inflation pressure. The explicit remark that the BOJ should not be too cautious about raising policy interest rates and should continue calmly with normalization of its balance sheet is clearly hawkish, suggesting upside risks for the YEN and a potential steepening of JGB yields as markets price a more assertive policy path.